Wednesday, October 3, 2018

Repositioning of Empty Containers Costs Box Lines and Shippers Alike

Digital Control Aims to Cut Supply Chain Costs
Shipping News Feature
WORLDWIDE – One of the major problems facing the ocean container shipping lines is the plethora of empty boxes which need repositioning to different ports around the world. The cost for carrying empty, as opposed to loaded, containers has to be met by someone, so it naturally gets passed on to shippers by way of extra costs. When Johannes Schlingmeier completed his doctoral thesis about empty container repositioning he included an analysis of such equipment data for around 56% of the global fleet.

Schlingmeier is the co-founder with Christian Roeloffs of xChange which for the past three years has been tackling the task of digitising empty container movements with a view to allow those in the supply chain to interchange their empty boxes with the aim of cutting operating costs and their environmental footprint. With a cost to industry that might reach $20 billion per annum the actual cost to carriers equates to between 5 and 8% of their operating overheads.

As is usually the case, persistence has paid off. Schlingmeier recalls that it was only after consistently appearing at trade fairs that people became familiar with xChange and started to take it seriously. Now the company has around 200 members with most of the top 10 leasing companies and highest ranked 20 container lines on board and the company is targeting NVOCCs and container traders.

xChange claims that, according to the Boston Consulting Group, the average savings per interchanged container ranges between $200-400, arising mainly from the avoidance of expenses related to land transportation and the use of terminals. This corresponds to potential annual savings (per carrier) of approximately $350 million to $700 million. Scaling up this impact to the top 100 carriers would promote annual savings of up to $4.5 billion.

Coverage of over 2,500 ports worldwide gives xChange a pretty vivid idea of where the problems of repositioning lie and their causes. Most activity is in the trade routes between Europe, the Middle East/ India and South East Asia, whilst other hotspots are new built containers ex China into North America, ANZ and Europe, plus increasing traffic on stretches such as ex China to the US, Australia/ New Zealand and in South Africa.

Schlingmeier believes being first to the market means that when it comes to competition his platform is unique as he sees no real digitally focused competitors, explaining:

“However, there are of course competitive products which are (a) brokers who match container supply and demand manually and without creating transparency and (b) quite simply personal contacts between market participants. As for the risks, cyber risks are certainly high up on the list but we think the biggest risk for us is losing neutrality and thereby our clients trust. Without trust, we will not get any updated information anymore and could close up shop.”

Photo: The collapse of Hanjin in 2016 left container leasing and finance companies struggling to locate and recover their assets with empty containers abandoned around the globe.